THE BRAMWELL GROWTH FUND
Quarterly Report -- March 1997
745 Fifth Avenue
New York, New York 10151
DEAR FELLOW SHAREHOLDERS:
INVESTMENT RESULTS -- QUARTER ENDED MARCH 31, 1997
First quarter markets were volatile; at its high in mid-February, the Fund had
appreciated 10.1% from the end of 1996, but following the Fed's interest rate
increase, the Fund ended the March quarter down (2.2)% to its quarterly low of
$14.69 per share. Taking the long view, the Fund's cumulative return from
inception, August 1, 1994, was 50.1% resulting in a compound average annual rate
of return of 16.4% for the period. In addition, the Fund appreciated since
March 31, 1997 through May 15th, the midpoint in the quarter, by 11.0%, bringing
the year-to-date increase to 8.6%, the cumulative return from inception to 66.6%
and the compound average annual return from inception to 20.1%. Investment
results compared to those of various indices were as follows:
YEAR ONE YEAR SINCE
TO DATE ENDED INCEPTION <F1>
---------------- --------------- ----------------
COMPARATIVE INVESTMENT
RETURNS 3/31/97 5/15/97 3/31/97 5/15/97 3/31/97 5/15/97
- ---------------------- ------- ------- ------- ------- ------- -------
THE BRAMWELL GROWTH
FUND <F2> (2.2)% 8.6% 5.6% 11.7% 16.4% 20.1%
S&P 500 Stock
Index <F3> 2.7 14.5 19.8 29.3 23.4 27.1
Lipper Growth Funds
Index <F4> (0.3) 9.5 12.1 18.1 18.4 21.3
Lipper Mid-Cap Funds
Index <F5> (6.6) 1.4 1.9 1.3 17.1 19.5
<F1> Compound average annual return since inception 8/1/94.
<F2> Returns shown include the reinvestment of all dividends and are net of
expenses. The annual expense ratio is capped at 1.75%. Past performance
is not predictive of future results. Investment returns and principal
value will fluctuate, so that shares, when redeemed, may be worth more or
less than the original cost.
<F3> The S&P 500 Stock Index is an unmanaged index of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The Index
is adjusted for dividends, weighted towards stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
<F4> The Lipper Growth Fund Index is comprised of the 30 largest funds which by
prospectus or portfolio practice, normally invest in companies with long-
term earnings expected to grow significantly faster than the earnings of
the stocks represented in the major unmanaged stock indices.
<F5> The Lipper Mid-Cap Funds Index is comprised of the 30 largest funds which
by prospectus or portfolio practice, invest primarily in companies with
market capitalizations less than $5 billion at the time of purchase. Funds
in the Lipper Growth Funds and Lipper Mid-Cap Funds Indices are equal
weighted and returns include the reinvestment of all dividends and are net
of expenses.
COMMENTARY
Strong profits and an environment of low inflation and interest rates were a
positive backdrop for the equity markets early in the first quarter of 1997.
Market reaction to the Federal Reserve's interest rate increase in late March
erased these earlier gains. Large capitalization stocks, particularly the
largest twenty-five stocks in the S&P 500 Index, reacted less negatively than
smaller caps to the rate increase and continued to lead equity performance.
Some 40% of the Fund's portfolio was invested in small and midcap stocks which
collectively acted as a drag on overall performance and countered gains in
larger capitalization equities. However, the portfolio is managed for the long
term rather than for a given quarter, and with the steep increase in valuations
for the largest S&P Index stocks, we believe that going forward, better
valuations are likely to be found in the broader market.
Portfolio sectors with positive performance for the quarter were financial
services (even after the rate increase, although pummeled the last day of the
period), global brands, and technology. Companies missing expectations were
severely punished, and Computer Sciences (CSC), one of our largest holdings
dropped from $82 to $62 by association with other companies in its industry with
disappointing earnings. CSC has subsequently recovered to the $70s, after
reporting better than expected earnings, and we believe that CSC's long-term
fundamentals remain strong. We continue to be constructive on financial
service, global brand and technology stocks.
OUTLOOK
We anticipate future equity market gains to be more dependent on earnings growth
as the threat of further Fed tightening curtails P/E expansion. However,
opportunities exist for individual stocks to advance towards their growth rates.
We estimate that the 1997 and 1998 earnings growth rates for our portfolio
approximate 21%, for which we are paying estimated price/earnings ratios of 18X
and 15X or P/E to growth ratios of 86% and 71%, respectively. By contrast, our
estimated future growth rate for the S&P Index is 8% which the market values at
approximate multiples of 16 and 15 times 1997 and 1998 estimated earnings or P/E
to growth ratios of about 200% - substantially higher than for our equity
universe. Over time, we expect stock prices to move with earnings growth; an
additional objective is to structure the portfolio for potential multiple
expansion as well.
As for the general economy, we anticipate Gross Domestic Product (GDP) growth to
decelerate from 5.6% in the first quarter of 1997 as the result of higher
interest rates slowing the durable goods and housing markets and a strong dollar
restraining exports. A strong dollar also creates more difficult currency
translations for multinational companies. We look for inflation to remain a
moderate 2 - 3% given a strong currency, competitive global manufacturing, and
technologically-driven improvements. The April Consumer Price Index (CPI) was
up only 0.1% for the month, and 2.5% from a year ago - the lowest increase in
some 30 years. With low inflation, the quality of earnings is high.
We are cautiously optimistic about the equity markets near-term in the face of
somewhat higher interest rates. Overall, we want to be invested to benefit from
long-term profit expansion. Historically, when the market moves on the upside,
the greatest gains are in the first few months. We continue to search for the
most effective, competitive users of technology across industries.
Specifically, we believe that technology's ability to drive economies of scale
is particularly favorable to financial service companies in facilitating
crossmarketing of services and reducing redundant costs. Product upgrades
continue to drive demand for richer and faster forms of computing, and new
methods of communication, such as the Internet, are rapidly creating new
operating procedures, distribution channels, and businesses. Updating software
for the year 2000 is stimulating job creation as well as improved information
systems. Accelerating change worldwide should continue to provide numerous
investment opportunities for our portfolio.
FUND INVESTMENT
The minimum initial investment for a Regular account is $1,000 and for an IRA or
Gift to Minor account $500. Subsequent investment minimums are $100 for Regular
and IRA accounts and $50 for a Gift to Minor account. Equity markets are
inherently volatile, as demonstrated in the first quarter, and investors are
encouraged to invest over time. In the long term, the rewards of ownership are
anticipated to more than compensate for the risk of day-to-day price
fluctuations. An Automatic Investment Plan, with initial and subsequent
investment minimums of $50 per month, is available upon request to facilitate
regular investment.
The Fund's net asset value is available each evening after 6:00 p.m. (EST) by
calling 1-800-BRAMCAP (1-800-272-6227). Please also call this number if you
need assistance or additional information.
Sincerely,
/s/ Elizabeth R. Bramwell
Elizabeth R. Bramwell, CFA
President and Chief Investment Officer
May 15, 1997
The outlook and opinions expressed above represent the views of the investment
adviser as of May 15, 1997 and are subject to change as market and economic
events unfold.
THE BRAMWELL GROWTH FUND
Portfolio of Investments -- March 31, 1997 (Unaudited)
SHARES VALUE
------- ------
COMMON STOCKS -- 96.55%
APPAREL -- 2.00%
Cutter & Buck, Inc. <F6> 45,000 $ 686,250
Nike, Inc. 25,000 1,550,000
----------
2,236,250
AUTOMOTIVE & HEAVY
EQUIPMENT -- 0.75%
Lear Corporation <F6> 25,000 834,375
CHEMICALS -- 0.95%
OM Group, Inc. 37,500 1,054,688
COMMUNICATIONS -- 2.68%
Cisco Systems, Inc. <F6> 25,000 1,203,125
OzEmail Ltd. - ADS <F6> 35,000 245,000
WorldCom, Inc. <F6> 70,000 1,540,000
----------
2,988,125
ELECTRONICS -- 4.09%
Black Box Corporation <F6> 27,000 725,625
Ingram Micro, Inc. <F6> 28,000 584,500
Intel Corporation 23,000 3,199,875
Kent Electronics Corporation <F6> 2,000 46,000
----------
4,556,000
ENERGY -- 2.96%
Camco International, Inc. 5,000 220,000
Diamond Offshore Drilling, Inc. <F6> 20,000 1,370,000
Global Marine, Inc. <F6> 40,000 860,000
Input/Output, Inc. <F6> 20,000 290,000
Rowan Companies, Inc. <F6> 25,000 565,625
----------
3,305,625
ENTERTAINMENT &
LEISURE TIME -- 2.70%
Cinar Films, Inc., Class B <F6> 30,000 735,000
Regal Cinemas, Inc. <F6> 70,250 1,896,750
Rockshox, Inc. <F6> 25,000 373,437
----------
3,005,187
FINANCIAL SERVICES -- 19.95%
American Express 40,000 2,395,000
Charles Schwab Corporation (The) 35,000 1,115,625
Chase Manhattan Corporation 30,000 2,808,750
Citicorp 15,000 1,623,750
First Union Corporation 27,000 2,190,375
MSB Bancorp, Inc. 17,000 284,750
Merrill Lynch & Co., Inc. 10,000 858,750
NationsBank Corporation 50,000 2,768,750
Northern Trust Company 65,000 2,437,500
Norwest Corporation 20,000 925,000
State Street Boston Corporation 8,000 555,000
Travelers Group, Inc. 25,000 1,196,875
Washington Mutual, Inc. 55,000 2,657,188
Zions Bancorporation 3,500 415,625
----------
22,232,938
FOOD & BEVERAGE -- 2.37%
CPCInternational, Inc. 20,000 1,640,000
Hershey Foods Corporation 20,000 1,000,000
----------
2,640,000
Shares Value
------ -----
HEALTHCARE -- 9.21%
Alkermes, Inc. <F6> 15,000 $ 210,000
Biacore International, AB - ADS <F6> 25,000 450,000
BioChem Pharmaceuticals, Inc. - ADR <F6> 15,000 645,000
Closure Medical Corporation <F6> 10,000 147,500
CYTYC Corporation <F6> 15,000 281,250
Guidant Corporation <F6> 16,000 984,000
Johnson & Johnson 57,200 3,024,450
Merck & Company, Inc. 30,000 2,527,500
Myriad Genetics, Inc. <F6> 4,000 138,000
Neurex Corporation <F6> 35,500 421,562
Pfizer Inc. 17,000 1,430,125
----------
10,259,387
HOUSEHOLD PRODUCTS -- 1.79%
Colgate-Palmolive Company 20,000 1,992,500
INDUSTRIAL PRODUCTS -- 10.48%
Emerson Electric Company 50,800 2,286,000
General Electric Company 35,000 3,473,750
Illinois Tool Works, Inc. 40,000 3,265,000
Molex Inc., Class A 45,687 1,599,045
Shaw Group, Inc. <F6> 15,000 343,125
ThermoQuest Corporation <F6> 35,000 490,000
X-Rite, Inc. 15,000 225,000
----------
11,681,920
INFORMATION PROCESSING:
OFFICE EQUIPMENT -- 4.71%
Compaq Computer Corporation <F6> 20,000 1,532,500
Dell Computer Corporation <F6> 27,000 1,825,875
Gateway 2000, Inc. <F6> 10,000 512,500
International Business Machines, Corp. 10,000 1,373,750
----------
5,244,625
INFORMATION PROCESSING:
SERVICES -- 4.73%
APAC TeleServices, Inc. <F6> 25,000 650,000
Claremont Technology Group, Inc. <F6> 30,000 705,000
Computer Sciences Corporation <F6> 53,729 3,317,766
Paychex, Inc. 10,000 411,250
USCS International, Inc. <F6> 10,000 185,000
----------
5,269,016
INFORMATION PROCESSING:
SOFTWARE -- 2.97%
Acceler8 Technology Corporation <F6> 6,500 98,313
Baan Company, N.V. <F6> 4,000 178,500
McAfee Associates, Inc. <F6> 10,000 442,500
Microsoft Corporation <F6> 23,000 2,108,812
Seachange International, Inc. <F6> 27,000 479,250
----------
3,307,375
INSURANCE -- 7.56%
Allstate Corporation 50,000 2,968,750
American International Group, Inc. 25,000 2,934,375
Conseco, Inc. 50,000 1,781,250
Horace Mann Educators Corporation 15,000 661,875
Nationwide Financial Services, Inc. <F6> 3,000 77,250
----------
8,423,500
PACKAGING -- 0.55%
Sealed Air Corporation <F6> 15,000 616,875
THE BRAMWELL GROWTH FUND
Portfolio of Investments -- March 31, 1997 (Unaudited) (continued)
Shares Value
------ -----
COMMON STOCKS -- 96.55% (cont'd.)
RETAILING -- 9.89%
Home Depot, Inc. (The) 18,000 $ 963,000
Just For Feet, Inc. <F6> 50,000 862,500
Kohl's Corporation <F6> 50,000 2,118,750
Loehmann's, Inc. <F6> 30,000 525,000
Saks Holdings, Inc. <F6> 35,000 1,006,250
Tiffany & Co. 57,800 2,196,400
Walgreen Company 80,000 3,350,000
----------
11,021,900
TEMPORARY HELP -- 6.21%
Barrett Business Services, Inc. <F6> 37,500 543,750
Interim Services, Inc. <F6> 54,900 2,134,237
Labor Ready, Inc. <F6> 50,000 393,750
On Assignment, Inc. <F6> 50,000 1,262,500
Registry (The), Inc. <F6> 4,000 142,000
Robert Half International, Inc. <F6> 70,000 2,441,250
----------
6,917,487
TOTAL COMMON STOCKS
(Cost $88,829,905) 107,587,773
-----------
Principal
Amount Value
--------- --------
VARIABLE RATE
DEMAND NOTES -- 3.51%
American Family $ 804,000 $ 804,000
Johnson Controls Corp. 1,447,000 1,447,000
Pitney Bowes, Inc. 370,000 370,000
Sara Lee Corporation 1,295,000 1,295,000
----------
TOTAL VARIABLE RATE DEMAND NOTES
(Cost $3,916,000) 3,916,000
----------
TOTAL INVESTMENTS -- 100.06%
(Cost $92,745,905) 111,503,773
LIABILITIES, LESS CASH
AND OTHER ASSETS -- (0.06)% (70,640)
----------
NET ASSETS -- 100.00%
(7,584,121 SHARES OUTSTANDING) $111,433,133
============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE $14.69
======
<F6> Non-income producing
TOP TEN INDUSTRY SECTORS
MARCH 31, 1997
- ---------------------------------------
Financial Services 20.0%
Information Processing 12.4
Industrial Products 10.5
Retailing 9.9
Healthcare 9.2
Insurance 7.6%
Temporary Help 6.2
Electronics 4.1
Energy 3.0
Entertainment & Leisure Time 2.7
TOP TEN EQUITY HOLDINGS
MARCH 31, 1997
- ---------------------------------------
General Electric 3.1%
Walgreen 3.0
Computer Sciences 3.0
Illinois Tool Works 2.9
Intel 2.9
Johnson & Johnson 2.7%
Allstate 2.7
American International Group 2.6
Chase Manhattan 2.5
NationsBank 2.5
THE BRAMWELL GROWTH FUND
745 Fifth Avenue
New York, New York 10151
1-800-BRAMCAP
(1-800-272-6227)
Board of Directors
- ---------------------------------------
ELIZABETH R. BRAMWELL, CFA
President, Chief Investment
and Financial Officer
The Bramwell Funds, Inc.
J. SINCLAIR ARMSTRONG
Director & Secretary
The Reed Foundation, Inc.
Retired Partner
Whitman, Breed, Abbott & Morgan
Former Commissioner & Chairman
Securities & Exchange Commission
ISABEL H. BENHAM
Director, Board of Trustees
John W. Barringer III National Railroad Library
GEORGE F. KEANE
Chairman
Trigen Energy Corp.
President Emeritus
The Common Fund, Inc.
JAMES C. SARGENT
Counsel
Opton, Handler, Gottlieb, Feiler & Katz
Former Commissioner
Securities & Exchange
Commission
MARTHA R. SEGER, PH.D.
Chairman
Martha Seger & Associates
Former Governor
Federal Reserve Board
Officers
- ---------------------------------------
ELIZABETH R. BRAMWELL, CFA
President, Chief Investment and Financial Officer
MARY F. MCCOLLUM
Secretary and Treasurer
MARGARET A. BANCROFT
Assistant Secretary
Investment Adviser
Bramwell Capital Management, Inc.
Administrator
Sunstone Financial Group, Inc.
Counsel
Dechert Price & Rhoads
Independent Certified
Public Accountants
Coopers & Lybrand L.L.P.
Custodian, Transfer Agent
and Dividend Disbursing Agent
Firstar Trust Company
This financial statement is submitted for the general information of the
shareholders of The Bramwell Growth Fund. It is not authorized for distribution
to prospective investors unless preceded or accompanied by an effective
prospectus.
